The new tenement landlord? : Rent regulated housing and the financialization of urban change

Investors have increasingly purchased rent regulated housing in New York City with heightened expectations for financial performance. The study positions these intensified expectations within the context of loosening housing regulations, increasing investment in real estate, and the perception that expanding reinvestment in property markets delivers ever-increasing property value and rent increases. Forensically-recreated ownership and financial histories from property and financial records for 9 cases of private equity purchases of regulated buildings, involving over 100 individual buildings and more than 10,000 apartments describe investors’ financial and property management strategies. In-depth interviews with 5 real estate finance experts and observation of professional conferences evaluated the financial modeling and placed the case studies within broader patterns of industry practice and market dynamics. In-depth interviews with 2 local government officials, 8 non-profit housing developers and 3 tenant organizers explained the implications of these investments for tenants and communities, and the political and policy response. Investors purchase rent regulated buildings and speculate on rent increases using three distinct but connected strategies. First, investors perceive rent regulated buildings in or near the core of Manhattan to be ‘undervalued’, and rely on the increasing difference between regulated rent and unregulated rent to anticipate very large rent increases. Second, investors view rent regulated buildings in non-core neighborhoods that had been operated on relatively thin profit margins and/or under-maintained as ‘mismanaged assets’, and leveraged low-income tenants’ constrained position in tight and increasingly expensive rental markets to realize increased building revenues. Finally, investors approach the failure of investment strategies as another investment opportunity in the ‘distressed debt’ of the rent regulated buildings—the defaulted mortgages on the properties. By using mortgage debt to anticipate above-average profits, investors create debt-financed pressure for increased financial performance. This practice heightens tenants’ vulnerability and threatens neighborhood stability through increasing rent, harassment, eviction, and when financial expectations are not met, foreclosure and physical deterioration of housing. These problems thwart long-established community development practice and housing policy, driving tenant activism and policy to engage legal-financial mechanisms to redefine the tenant-landlord relationship and to tie financial expectations more closely to the material reality of tenants and communities.Ph.D.Includes bibliographical referencesby Benjamin Francis Teres